March 6, 2023
“Many conversations in the sustainability arena are risk-oriented but looking at the opportunity is how we make an impact at scale,” stated Cathal Carr, Senior Vice President, Chief Underwriting Officer – Europe and Global Head – Climate and Sustainability Underwriting Strategy at RenaissanceRe (pictured, left and top right), at the Sustainable Insurance Summit in February.
His comments captured the importance of recognising the huge and varied strategic opportunities presented to (re)insurers in the multi-trillion-dollar Green Industrial Revolution – and the vital role the industry must play in enabling the transition.
Carr featured in a panel discussion entitled ‘Opportunities in the sustainable economy’ alongside Anthony Bice, Partner, Climate & Sustainability, Insurance & Asset Management at Oliver Wyman, Tom Clifton, Head of Power & Renewable Energy at Liberty Specialty Markets, and Juan Duan, Head of Financial Climate Risk at Beazley.
Moderator Bice set the scene for a wide-ranging discussion, outlining four key areas of opportunity for the (re)insurance industry in the transition:
And while sustainability may have been seen first and foremost as a reputational and regulatory risk issue by many (re)insurers, many now have their eyes wide open to the opportunities; an audience poll taken during the session revealed 48% of respondents’ firms are actively developing new and existing products to support the transition and a further 22% are assessing where opportunities lie with a view to innovate. The remaining 30% recognise there are opportunities but are yet to formulate a strategy.
For reinsurers, the primary goal must be to enable increasing levels of risk contingent capital to flow into areas of the economy that have a positive environmental and social impact and support the transition to net-zero, Carr said. To do this, carriers must improve their ability to assess environmental and social impacts at an individual underwriting transaction level and also work collaboratively to develop innovative portfolio solutions need to deliver capital at scale, he explained.
The panel acknowledged a range of commercial realities and challenges exist that the industry must overcome if it is to play its critical role, including providing unprecedented levels of capacity to keep pace with expansion of the renewables industry and the inherent challenges of underwriting emerging technologies with limited loss histories.
Another audience poll found that getting the pricing right is seen by most (60%) as the biggest barrier to underwriting emerging tech, while establishing the long-term feasibility of untested solutions and industries the next biggest challenge (27%).
However, these issues can be overcome by working together, Carr argued. “If we work in isolation and try to generate alpha over our peer group, we won’t be successful. The only way we’re going to really generate change is through collaboration,” he said. “One of the key opportunities for us as risk managers collectively is to drive home the message that sustainable impact and financial returns are not mutually exclusive.”